In the literature of CAPM violations, one of theoretically based approaches for selecting factors is to create factor portfolios based on firm characteristics which has been used in a number of studies. Which of the following is/are true about the empirical evidence of Fama-French (1993) ? 1. The main factors driving expected returns are sensitivity to the market, sensitivity to size, and sensitivity to value stocks II. Using 25 portfolios, they found that market risk is not enough to explain the cross-section of stock returns since both additional factors are significant III. Firms with high book-market ratios have lower average returns than is predicted by the CAPM IV. Firms with small market capitalisation have lower average returns than is predicted by the CAPM Select one: O a. II, III O b. I, IV O c. I, II, III O d. None of the options